Shares are worst FTSE performers
Royal Mail staff face paper loss after profits warning
Royal Mail’s letter post has seen a slump in junk mail (pic: Terry Murden)
Royal Mail’s pay awards to top bosses have come under under fire after a shock profit warning which sent its shares 25% lower at one point and put its dividend under threat.
The company’s value eventually sank by £800 million after chief executive Rico Back said profits would come in between £500m and £550m this year, well below the £694m it reported last year.
The company blamed the profits slump partly on a bigger than expected downturn in the marketing mail sector as a result of the new GDPR privacy rules that have hit the amount of unsolicited or junk mail being sent out.
It also missed its £230m productivity target and now only expects to achieve £100m in savings. Analysts believe the dividend could be sacrificed and consumers forced to pay more for stamps and other deliveries.
Critics say its executives have enjoyed big pay deals just ahead of the slump, while employee-shareholders have seen the value of their shares plummet.
The company was the subject of a shareholder revolt over the summer when 70% of investors voted against its remuneration policy, including a £2.4m golden goodbye for outgoing chief executive Moya Greene and a £6m golden hello for Back, her replacement, who started in June.
Cliff Weight, of private shareholders group Sharesoc, said: “With the benefit of hindsight, it rather looks like rewards for failure.
“The remuneration committee has serious questions to answer and I will be going to the next AGM to ask them.”
Shares in Royal Mail recovered to close 8.4%, or 32.8p, lower at 358.6p, leaving the company’s 140,000 share-owning staff sitting on paper losses of more than £100 million, days before a lock-up period on selling their shares tax free expires.
From 15 October, Royal Mail staff will be able to sell their shares without paying national insurance and income tax, coinciding with the fifth anniversary of the company’s 2013 flotation.
Staff were given 10% of the company for free when it was controversially privatised. They have been able to sell them since 2016 but were subject to tax deductions.
The shares hit a record high of 630p in May. They were floated at 330p, prompted accusations the company was sold on the cheap.
It is currently valued at £3.7bn – it was valued at £3.3bn at flotation – and now faces the prospect of being ejected from the FTSE 100 at the next reshuffle in December.